NATIONAL POWER CORPORATION, PETITIONER, VS. THE COURT OF APPEALS; B. E. SAN DIEGO, INC., RESPONDENTS.

This is a Petition for Review on Certiorari of the Decision of
the then Court of Appeals, promulgated on December 24, 1980, in CA-G.R.
No. 55959-R, entitled “National Power Corporation, Plaintiff-Appellant,
versus B. E. San Diego, Inc., Defendant-Appellant.”

In 1961, petitioner National Power Corporation (NPC, for short),
commenced negotiations with the spouses Esteban Sadang and Maria
Lachica, then the registered owners, for the purchase of a portion of
8,746 sq. ms. of the latter’s parcel of land of 62,285 sq. ms., situated
in Barrio San Mateo, Norzagaray, Bulacan, for the purpose of
constructing an access road to its Angat River Hydroelectric Project.
Although the negotiations were not yet concluded, NPC never­theless
obtained permission from said spouses to begin construction of the
access road, which it did in November 1961.

On December 7, 1962, B. E. San Diego, Inc. a realty firm and private
respondent herein (SAN DIEGO, for short), acquired the parcel of land at
a public auction sale and was issued a title.

On February 14, 1963, NPC instituted proceedings for eminent domain
against the spouses Sadang in the Court of First Instance of Bulacan
(Civil Case No. 2725), later amended on June 20, 1963, with leave of
Court, to implead SAN DIEGO. The Motion to Amend was only granted on
June 21, 1968. On March 19, 1969, the Trial Court appointed three
Commissioners, one for each of the parties and another for the Court, to
receive the evidence and determine the just compensation to be paid for
the property sought to be expropriated. After the Commissioners had
submitted their individual Reports and after evaluating the evidence
adduced, the Trial Court rendered a Decision on March 28, 1973, the
dispositive portion of which reads:

“WHEREFORE, judgment is rendered:

a) Declaring to plaintiff the full and legal right to
acquire by eminent domain the absolute ownership over the portion of the
land referred to in Paragraphs 4 and 9 of the Amended Complaint,
consisting of 8,746 square meters, access road of the plaintiff to its
Angat River Hydroelectric Project;

b) Authorizing the payment by plaintiff to defendant of the
amount of P31,922.00 as full indemnity for the property at the rate of
P3.75 per square meter, with interest at 12% per annum from March 11,
1963 until fully paid;

c) A final Order of Condemnation over the property and
improvements therein is entered, for the purpose set forth, free from
all liens and encumbrances;

d) Ordering the registration of this Act of Expro­priation,
at plaintiff’s expense, with the Register of Deeds of Bulacan at the
back of defendant’s title to the whole property.

SO ORDERED.”

Both parties appealed to the then Court of Appeals, which rendered a Decision on December 24, 1980, decreeing:

“Considering the peculiar facts and circumstances obtaining in the
present case, it is our considered view that the just and reasonable
compensation for the property in question is P7.00 per square meter.

ACCORDINGLY, the judgment appealed from is hereby modified as indicated above. No costs.

SO ORDERED.”

Reconsideration having been denied, NPC availed of the present recourse,
to which due course was given. SAN DIEGO did not appeal from the
Appellate Court judgment although it filed a Brief.

The issues presented are whether or not respondent Court erred (1) in
fixing the amount of P7.00 per square meter as just compensation for the
portion of land sought to be expropriated based on its planned
convertibility into a residential subdivision; and (2) in not reducing
the rate of interest payable by NPC from twelve (12%) per cent to six
(6%) per cent per annum.

The Trial Court and respondent Court assessed the conflicting evidence
in different lights. Reproduced below are partial findings of the Trial
Court:

“The plaintiff’s commissioner, to begin with, recommended a price
of P0.50 per square meter; defendant’s commissioner indicated P20.00 per
square meter, while the commissioner of the Court pegged the value at
P4.00 per square meter. The total road area consists of 8,746 square
meters (Exhibits 4-4-c, inclusive). Against the sketch (Exhibit D-1)
presented by plaintiff, the former should prevail.

There is competent testimony, too, that the land was cogonales at the
time of the occupancy. During rainy season, according to Celedonio
Juarez, Instrumentman of Survey Team of the plaintiff, the proposed road
could only be passable by animal drawn sledges; that in contrast, the
accessway under its present condition is fully paved. Shaped to a curve,
the thoroughfare should provide a marked improvement to the flourishing
housing subdivision managed by the defendant.

Also, the prevailing market price of residential lots in the area,
according to the reputable C. M. Montano Realty, is P20.00 per square
meter. Even taking the face value of the appraisal made, it would be
unfair to compel plaintiff to pay the same price after constructing a
30-meter wide road through the property a decade ago which enhanced its
commercial value, not to mention the aesthetic gain. Safe to say,
therefore, except for the cost of the land area encompassed by the road,
there is negligible, if any, consequential damage to speak of.

Defendant’s contention, on the other hand, that the location of the
road is burdensome appears to be more idealistic than meritorious. The
right of way as now built is more beneficial to the adjoining
subdivision owner (defendant) in the sense that the residential lot on
both flanks of the road could command a higher price. This may not hold
true if the access road were to be built on the east side boundary as
proposed by the defendant because only one side of the road may be
devoted to the housing area. x x x Related is evidence from
defendant that the plaintiff had once negotiated to purchase the
property at P5.00 per square meter. At first glance, this would appear
significant and in keeping with the fair market value. But noticeably,
the offer was made some nine (9) years after actual taking. It is
pertinent to point out, the spouses Sadang when first contacted by the
plaintiff in 1961, offered to part with the piece of property at P4.00
per square meter. The difference in the price could be reasonably traced
to the fact that the couple then may not have any concrete plan to
develop the area into a subdivision until the defendant came into the
picture. But the Sadangs were the registered owners at the time of
actual occupancy, defendant’s mortgage lien notwithstanding. Being so,
they were clothed with legal personality to enter into any transaction
with the plaintiff. The property was agricultural, in use as well as for taxation purposes. (Exhibits A and B). Privy to this fact, the spouses were presumably aware of the reasonableness of their offer to sell.

“Thus, ‘the fair market value of the land sought to be
expropriated’, according to the Supreme Court, ‘should be determined
either at the time of actual taking or at the time of the filing of the
complaint, whichever is earlier. The future convertibility of the
property into some other classification does not affect the nature of
property.’ (Alfonso vs. Pasay City, G.R. No. L-12754, January 30, 1960).

xxx                xxx                   xxx

“ALL CONSIDERED, P3.75 a square meter is and represents the fair market value” (Italics ours).

On the other hand, respondent Court reasoned thus:

“It has been amply shown that the defendant purchased the land for
the purpose of converting the same into a first class residential
subdivision. The court’s commissioner and the trial court itself took
cognizance of such project of the defendant (pp. 130-131, 163, Record on
Appeal). It is worthwhile to note that, before the access road was
cons­tructed on the property, plaintiff had already known of the
defendant’s plan of converting the land into a subdivision, since
plaintiff had in his custody a copy of defendant’s subdivision plan,
Exhibit 7. In point of fact, Exhibit 7 was produced in court by the
plaintiff from its own record (p. 97, Record on Appeal). Evidence has
also been adduced to show that, as appraised by C.M. Montano Realty, the
prevailing market price of residential lots in the vicinity of
defendant’s land was P20.00 per square meter (p. 163, Ibid).

“Defendant further maintains that because the access road was not
constructed in a straight line, the property was unnecessarily divided
into three separate and irregular segments (Exhibit 4). According to the
court’s commissioner, the road, as actually laid out, had rendered the owner’s plan of converting the land into a subdivision ‘futile‘.

x x x              x x x

“Needless to state, plaintiff should have given heed to the above
legal prescription (Art. 650, Civil Code) by having constructed the road
in a straight line in order to cover the shortest distance, and thus
cause the least prejudice to the defendant. Plaintiff failed to observe
this rule, and no explanation has been offered for such neglect. These
facts contradict the conclusion of the lower court that ‘except for the
cost of the land encompassed by the road, there is neglible, if any,
consequential damage to speak of.’ (p. 164, Record on Appeal).

“It is noted that the only basis of the court a quo in assessing
the just compensation of the property at the price of P3.75 per square
meter is that at the time of act­ual occupancy by the plaintiff, ‘the
property was agricultural in use as well as for taxation purposes
(Exhibits A and D (p. 165 Record on Appeal).’ But such posture is hardly
in accord with the settled rule that ‘in determining the value of the
land appropriated for public purposes, the same considerations are to be
regarded as in a sale of property between private parties. The inquiry,
in such cases, must always be not what the property is worth in the
market, viewed not merely as to the uses to which it is at the time
applied, but with reference to the uses to which it is plainly adopted;
that is to say, what is its worth from its availability for valuable
uses?’ (City of Manila vs. Corrales, 32 Phil. 85, 98). It has
also been held ‘that the owner has a right to its value for the use for
which it would bring the most in the market’ (City of Manila vs. Corrales, supra; Republic vs. Venturanza, et al. 17 SCRA 322, 327).

Indeed, we cannot lightly brush aside the evidence showing that
plaintiff’s failure to observe the rule for laying out the right of way
easement in a straight line had prevented the defendant from carrying
out its plan of converting the property into a housing subdivision. This
consequential damage must be taken into account in the assessment of
the just compensation of the property” (Italics supplied).

After a review of the records, we are of the considered opinion that the
findings of the Trial Court merit our approval for several reasons:

(1) Both documentary and oral evidence indicate that
the land in question, at the time of taking by NPC in 1961, was
agricultural in use as well as for taxation purposes. In fact, it was
described as “cogonales”.

(2) SAN DIEGO’s contention that the location and
di­rection of the access road is burdensome is not borne out by the
evidence. The Report of the Commissioner of the Court revealed that NPC
merely improved a pre-existing mining road on the premises, which was
only accessible by carabao-drawn sledge during the rainy season.^[1] As concluded by the Trial Court, which had the benefit of autoptic observation:

“Defendant’s contention, on the other hand, that the location of
the road is burdensome appears to be more idealistic than meritorious.
The right of way as now built is more beneficial to the adjoining
subdivision owner (defendant) in the sense that the residential lot on
both flanks of the road could command a higher price. This may not hold
true if the access road were to be built on the east side boundary as
proposed by the defendant because only one side of the road may be
devoted to the housing area.”

(3) The finding of the Trial Court that “there is
neg­ligible, if any, consequential damage to speak of” thus be­comes
readily tenable. SAN DIEGO was not, as was the belief of respondent
Court, “prevented from carrying out the plan of converting the property
into a housing subdivision.” On the contrary, the Trial Court observed
that “the thoroughfare should provide a marked improvement to the flourishing housing subdivision managed by defendant (private respondent.”

(4) The appraisal by a realty firm of P20.00 per square
meter, the price that SAN DIEGO stresses the property should command,
is not, to our minds, a fair market value. The former owners, the Sadang
spouses, offered to part with the property at P4.00 per square meter.
SAN DIEGO had purchased the entire property of 62,285 square meters at
public auction for P10,000.00, or at P0.16 per square meter. Previous to
that, or in 1957, the property was mortgaged to the Develop­ment Bank
of the Philippines for P20,000.00 and subsequently in 1958 to SAN DIEGO,
by way of second mortgage, for P30,000.00. The observation of the Trial
Court, on this point, is decidedly apropos:

x x x

“A very important point: On the basis of a recog­nized policy of
lending institutions to grant a maximum mortgage loan corresponding to
60% of the appraised value of the real estate collaterals, the twenty
thousand mortgage loan extended by the Development Bank of the
Philippines to the spouses Sadang would roughly place the approximate
value of the property at P33,330 or roughly P0.51 per square meter. And
at this ratio, by granting a second mortgage of P30,000, the defendant
impliedly placed the recoverable value of the property within P83,333.33
for the area of 62,285 square meters or about P1.33 per square meter.
That was in 1958, the year of the second mortgage (Exhibit 12), or an
annual increase in price at the rate of P0.81 per square meter. From
1958 to 1961 (date of actual taking) represents three years, or an
aggregate increase of P2.43 per square meter. Add P1.32 to this thus
making a total of P3.75 per square meter.”

The price of P12.00 to P15.00, which respondent Court observed as the
just compensation awarded in two civil suits for lands condemned in the
immediate vicinity, cannot be a fair gauge since said Court neither
adopted the same, and specially considering that the property was
“cogonal” at the time NPC constructed its access road in 1961. Moreover,
NPC also presented contrary evidence indicating prices of P.05 and P.06
per square meter at around the time it had entered the property. In
fact, in respect of sales within the locality, the Trial Court had this
to say:

“While sales of properties within the locality in the same year or
thereabout may serve as a guiding factor in ascertaining a fair market
value yet there appears want of proof to show that the alluded sales
(Exhibits I-1, J, K, and L) referred to properties of similar nature nor
was proximity to the land in question properly shown.”

(5) And most importantly, on the issue of just compensation, it is
now settled doctrine, following the leading case of Alfonso vs. Pasay^[2]
, that to determine due compensation for lands appropriated by the
Government, the basis should be the price or value at the time it was
taken from the owner and appropriated by the Government.

“The owner of property expropriated by the State is entitled to
how much it was worth at the time of the taking. This has been clarified
in Republic vs. PNB (1 SCRA 957) thus: ‘It is apparent from
the foregoing that, when plaintiff takes possession before the
institution of the condemnation proceedings, the value should be fixed
as of the time of the taking of said possession, not of filing of the
complaint, and that the latter should be the basis for the determination
of the value, when the taking of the property involved coincides with
or is subsequent to, the commencement of the proceedings. Indeed,
otherwise, the provision of Rule 69, section 3, directing that
compensation ‘be determined as of the date of the filing of the
com­plaint’ would never be operative.”^[3]

In the case at bar, the taking by NPC occurred in November 1961, when it
constructed the access road on, the expropriated property at time when
it was still “cogonal” and owned by the spouses Sadang. The Complaint
was filed only in 1963.

The convertibility of the property into a subdivision, the criterion
relied upon by respondent Court, is not controlling. The case of Manila
Electric Co. vs. Tuason, 60 Phil. 663, 668, cited in Municipal Govt. of Sagay vs. Jison^[4] , has categorically ruled that it is the time of taking and not as “potential building” site that is the determining factor,

“x x x if the property to be expropriated was agricultural, the
adaptability thereof for conversion in the future into a residential
site does not affect its nature when plaintiff assumed possession of the
property, although it is a circumstance that should be considered in
determi­ning its value at that time, as an ‘agricultural’ land.”^[5]

The doctrines in the cases of City vs. Corrales, 32 Phil. 85 (1915) and Republic vs. Venturanza, 17 SCRA 322 (1966) relied upon by respondent Court must be deemed to have been superseded not only by the Alfonso, Carlota, and Sagay cases but also by Republic vs. Narciso, 99 Phil. 1031 (1956); Republic vs. Philippine National Bank, 1 SCRA 957 (1961); and Republic vs.
Juan, 92 SCRA 26 (1979), all of which held that the nature of the land
at the time of taking by the Government is the principal criterion for
awarding compensation to the landowner. The subdivision was not in
existence when NPC entered the land.

Since SAN DIEGO bought the land in question in the interim and was
issued a title only on December 7, 1962, the “taking” as to it should
commence only from said date.

On the issue of legal interest in expropriation proceedings, we held in Amigable vs. Cuenca, 43 SCRA 360 (1972), that:

“As regards the claim for damages, the plaintiff is entitled
thereto in the form of legal interest on the price of the land from the
time it was taken up to the time that payment is made by the government.
In addition, the government should pay for attorneys fees, the amount
of which should be fixed by the trial court after hearing.”

In the case at bar, legal interest should accrue from December 7, 1962,
the time of taking as far as SAN DIEGO is concerned, at six per cent
(6%) per annum, up to the time that payment is made by NPC.

Not having appealed from the Decision of respondent Court, SAN DIEGO
cannot ask for its modification by way of increasing the amount of
compensation and including an award for attorney’s fees.^[6]

WHEREFORE, the judgment of respondent Appellate Court, dated December
24, 1980, is hereby set aside, and the Decision of the then Court of
First Instance of Bulacan, Branch I, in Civil Case No. 2725, authorizing
payment of P31,922.00 as full indemnity for the property at the rate of
P3.75 per square meter is reinstated. Petitioner is directed to pay
interest at six per cent (6%) per annum on the amount ad­judged from
December 7, 1962, until fully paid. No costs.
SO ORDERED.

Teehankee, (Chairman), Plana, Relova, Gutierrez, Jr., and De la Fuente, JJ., concur.

---

^[1] p. 123, Record on Appeal.

^[2] 106 Phil. 1017 (1960).

^[3] Mun. of La Carlota vs. The Spouses Baltazar, et al., 45 SCRA 235 (1972).

^[4] 104 Phil. 1026 (1958).

^[5] Mun. Govt. of Sagay vs. Jison, ibid.

^[6] Aparri vs. Court of Appeals, 13 SCRA 611 (1965).